Brazilian budget airline Gol has said it is buying its struggling rival Varig for $275m (£140m).

The deal will see Gol take on Varig's debt of about $45m, and get access to its routes to the US and Europe as well as valuable slots at Sao Paulo airport.

Once Latin America's largest flagship carrier, Varig almost collapsed under debt last year and was operating under bankruptcy protection.

It re-emerged after being bought by an investment group Volo de Brasil.

Commitment

Varig and Gol would be run as separate companies, Gol said, with Varig keeping its own brand and its Smiles frequent flyer programme.

It would also see its number of planes double to 34, serving Frankfurt, London, Madrid, Milan and Paris as well as US and South American destinations, it added.

"With this acquisition, Brazil will maintain an important flag in global aviation, the industry will benefit from an increase in jobs and demand will be better served," said Gol's chief executive, Constantino de Oliveira Junior.

He added Gol would keep its focus on its low-cost, low-fare business model, with a single class of service in the Brazilian domestic market and South America.

Under the deal, Gol will also take control of the cargo business, VarigLog.

Chilean carrier LAN had been eyeing Varig as a possible acquisition, analysts said, and news it had missed out pushed its shares down 3%.

Before being sold to Volo, Varig had been due to be bought by a consortium of workers at the airline.